When you are trying to perform a Windows Server Image Restore into a VM but your getting the Error -

An internal error occurred. The following information might help you resolve the error:
The network path was not found. (0x80070035)

4 Steps total

Step 1: Set up a new host for your machine

Create a new VM from within the Hyper-V Manager console. Create a new virtual hard drive and make sure you set it to a size equal or greater than the hard drive of your old machine.

Step 2: edit the settings for this VM

Before starting your new VM, go back to the Hyper-V Manager console, and edit the settings for this VM. Delete the existing network adapter, and add a Legacy Network Adapter Note: If you don’t do this, you’ll receive the error message described above.

Step 3: Attached the ISO

Insert the Windows disc in your DVD drive, capture it in your new VM and start the VM.
Or
Attached the Server 2008 R2 ISO to the VM for bootup

Step 4: Perform resotre

Perform the bare metal restore by choosing to Repair your computer, Complete PC Restore, then Cancel (to ignore the message that no backups could be found), Advanced, then Search for a network backup, and so on.

Explanation: The regular Network Adapter in Hyper-V requires drivers under Server 2008, meaning that unless you have those drivers installed, you won’t be able to see the network. This means that the Windows Recovery Environment cannot use the network card, so you cannot do a bare-metal restore from a UNC path.

The Legacy Network Adapter can be used without drivers, so you can do a bare-metal restore from a UNC path.